Cabinet Approves Continuation and Revamping for Financial Support to
Public Private Partnerships in Infrastructure Viability Gap Funding VGF Scheme
The Cabinet Committee on Economic
Affairs chaired by Prime Minister Narendra Modi has approved Continuation and Revamping of the Scheme for Financial
Support to Public Private Partnerships (PPPs) in Infrastructure Viability Gap Funding
(VGF) Scheme till 2024-25 with a total outlay of Rs. 8,100
cr.
The revamped Scheme is mainly related
to introduction of following two sub-schemes for mainstreaming private participation
in social infrastructure:
a. Sub scheme -1
This would cater to Social Sectors
such as Waste Water Treatment, Water Supply, Solid Waste Management, Health and
Education sectors etc. These projects face bankability issues and poor revenue streams
to cater fully to capital costs. The projects eligible under this category should
have at least 100% Operational Cost recovery. The Central Government will provide
maximum of 30% of Total Project Cost (TPC) of the project as VGF and State Government/Sponsoring
Central Ministry/Statutory Entity may provide additional support up to 30% of TPC.
b. Sub scheme -2
This Sub scheme will support demonstration/pilot
social sectors projects. The projects may be from Health and Education sectors where
there is at least 50% Operational Cost recovery. In such projects, the Central Government
and the State Governments together will provide up to 80% of capital expenditure
and upto 50% of Operation & Maintenance (O&M)
costs for the first five years. The Central Government will provide a maximum of
40% of the TPC of the Project. In addition, it may provide a maximum of 25% of Operational
Costs of the project in first five years of commercial operations.
Since the inception of the scheme, 64 projects have
been accorded 'final approval' with Total Project Cost of Rs.
34,228 crore and VGF of Rs. 5,639 crore. Till the end
of Financial Year 2019-20, VGF of Rs. 4,375 crore has
been disbursed.
Benefits:
The aim of the scheme is to promote
PPPs in social and Economic Infrastructure leading to efficient creation of assets
and ensuring their proper Operation and Maintenance and make the economically/socially
essential projects commercially viable. The scheme would be beneficial to public
at large as it would help in creation of the Infrastructure for the country.
Implementation Strategy:
The new Scheme will come into force
within one month of the approval of Cabinet. Proposed amendments under the revamped
VGF scheme would be suitably incorporated in the Guidelines for the Scheme. All
steps will be taken up for the promotion of the revamped VGF and in monitoring of
the supported projects.
Impact:
Revamping of the proposed VGF Scheme
will attract more PPP projects and facilitate the private investment in the social
sectors (Health, Education, Waste Water, Solid Waste Management, Water Supply etc.).
Creation of new hospitals, schools will create many opportunities to boost employment
generation.
Expenditure Involved:
The revamped Scheme will be financed
from budgetary support of Ministry of Finance. The projected outlay of the revamped
VGF scheme till the Financial Year 2024-2025 is as under:
|
Financial Year |
Scheme for Financial Support to PPPs in
Economic Infrastructure - (Rs. crore) |
Scheme for Financial Support to PPPs in Social
Infrastructure - (Rs. crore) |
|
2020-21 |
1,000 |
400 |
|
2021-22 |
1,100 |
400 |
|
2022-23 |
1,200 |
400 |
|
2023-24 |
1,300 |
400 |
|
2024-25 |
1,400 |
500 |
|
Total |
6,000 |
2,100 |
Background:
The Department of Economic Affairs,
Ministry of Finance introduced "the Scheme for Financial Support to PPPs in
Infrastructure" (Viability Gap Funding Scheme) in 2006 with a view to support
infrastructure projects undertaken through PPP mode that are economically justified
but commercially unviable due to large capital investment requirements, long gestation
periods and the inability to increase user charges to commercial levels, hi this
existing Scheme, VGF up to 40%of the Total Project Cost (TPC) is provided by the
Government, of India (Gol) and the sponsoring authority
in the form of capital grant at the stage of project construction (20%+20%).